Boat offers and the negotiation process

mod45 said:

Everyone's different. I'm not offended by any offer and certainly don't need to see it in writing because a buyer can back out of it several ways. If they're serious, the followup will happen within 24 hours, if not who cares.

I've sold businesses, solidified partnerships and bought/sold real estate with numbers that were exchanged in emails/calls and minimal due diligence. Certainly there's work after that number's been agreed to and it can fall apart depending on circumstances, but at the very least it assures a buyer and seller they are on the same wavelength and not wasting time.

One of my first businesses got a letter one morning, FedEx'd overnight from a huge law firm, stating that someone wanted to talk to us about an acquisition but we needed to sign an NDA and talk to their attorney. We tossed it. The next day the attorney emails us asking about the letter and we told him we didn't want to deal with someone who did business through a law firm. The third day I got a call from the owner of the business but our relationship was off to a rocky start and it never got serious.

A year later, a public company biz dev guy sends us an email asking to "talk" that afternoon. We were on a call within 2 hours. The next day the CEO and several VPs were at our office across the country at 830am. The day after that they made an offer on the phone and 3 months later it was done. Those 3 months were like an extended financial colonoscopy, but the framework of the deal was in place within 48 hours and no lawyers.

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Bravo. Refreshing. My partner/brother and I have done (significant) business this way for three decades. Make the deal in good faith and then write it up. Not conventional and not for the paranoid for sure, but it seems to me that business/transactions need not be sub-human and therefor relegated to brokers and lawyers.

I find no fault with your approach to buying this boat as well. It didn't work out this time but is not an indictment of the method, a method which appears more rational than the conventional tap dance that normally goes on in these sorts of things. If I were the seller I would have expected the broker to keep me abreast of conversations like you described and I would have engaged.

Carry on and good luck.

I am going to approach this from a different angle. This is also not meant to insult any one but to make sure all angles are covered.

Is it possible that the broker thinks you are a waste of his time. I am not suggesting anything is wrong with you or that you are a waste of time. I see a lot of brokers who think very highly of them selves, think they can read every customer like a book. These are the guys who try to bully deals together rather than sell a deal.

The fact that he didn’t push you to put your deal in writing as at least a backup deal tells me there is something wrong with this broker. There is a lot of opportunity for a deal to fall apart. Nothing puts me in a better negotiating position than to tell a customer I have a back up deal. So why did he blow you off. Is it possible that his buddy has made a low offer on this boat and he has successfully scared you away?

Is it possible that you don’t present well. I don’t know you, I don’t know how you dress or how you talk or if you smell and i’m Not suggesting that you don’t present well. I’m just putting the question in your head.

Anyway, you have gotten some solid advice already and I just wanted to toss in some things to think about.

Lastly, it might not be too late to take a run at this.

Mmm, not meant to insult...ok.
klee wyck, I agree. A deal comes from the intentions and integrity of the parties, not a piece of paper. Marriage likewise. In case things go wrong or uncertainty arises a deal should be documented(sometimes it`s obligatory), but it`s not what makes the deal work.
Unfortunately the OP never got as far as a deal,let alone documenting it. There is nothing inherently wrong in oral negotiations, though for myself, I`d prefer negotiations in writing especially if there is any complexity. Like the OP`s " I won`t seek to adjust price post survey for these items".
(Confession: retired lawyer)

tiltrider1 said:

I am going to approach this from a different angle. This is also not meant to insult any one but to make sure all angles are covered.

Is it possible that the broker thinks you are a waste of his time. I am not suggesting anything is wrong with you or that you are a waste of time. I see a lot of brokers who think very highly of them selves, think they can read every customer like a book. These are the guys who try to bully deals together rather than sell a deal.

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No offense taken. I don't think this is the case. A brief amount of research and the conversation we had would confirm I'm a qualified buyer.

klee wyck said:

Bravo. Refreshing. My partner/brother and I have done (significant) business this way for three decades. Make the deal in good faith and then write it up. Not conventional and not for the paranoid for sure, but it seems to me that business/transactions need not be sub-human and therefor relegated to brokers and lawyers.

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Thanks. I try to treat everyone as competent and honest until they prove otherwise. Sure it's blown up in my face on occasion, but in the long run it's saved me countless hours, legal fees and forged some great partnerships.

"Sometimes it does not hurt to find out who the owner is and speak directly to them."

Always worthwhile as you can feel out the seller and decide if the boat will be useful to you.

Some will disclose their maint sked , or none!

It costs big bucks and time to create a cruiser out of a dock queen.

To a great extent the newer a boat is the better chance it is a dock queen.

Sorry I am a bit late to the conversation........ So there is no misunderstanding of the law, at least as it pertains to Florida:

Under CHAPTER 326, FLORIDA STATUTES YACHT AND SHIP BROKERS’ ACT, 326.006 Powers and duties of division, paragraph e., 4. a brokers license may be revoked if he/she "Acts for both the buyer and seller in a transaction involving a yacht without the knowledge and written consent of both parties."

It would appear, if disclosed, the broker can represent both parties.

As a broker, I also agree that an offer (or counter offer) is not valid, unless presented in writing. I don't respond to "would he take?" from a buyer.

Also, with the OP's issue, if the first offer had been either countered, or accepted, then the ball was in the first buyer's court. Once seatrials and surveys had been completed, seller may have decided to continue and negotiate a lower price and/or agree to fix the deficiencies rather than have the boat go back on the market. The old "bird in hand" situation.

I have long ago stopped trying to figure out what "actually" goes on in the head of a buyer or seller. I have seen sellers accept the lower of 2 offers because the seller thought their "baby" would be in better hands.

One of the key elements of being a CPYB (Certified Professional Yacht Broker) is knowing you don't "own" or control the client. You just represent them to the best of your ability with goot ethics, with the emphasis on good ethics.

We don't have enough information in this situation to really know what happened.

A little off subject;

When on the hunt for our first larger -for us- boat (Knot Salted), the listing was by a broker that had good communication with the seller. Upon request, we were able to meet and work directly with the owner during a three month buying process before sea trials were possible on Lake Erie.

There were negotiations, and the broker had done and did his job and earned his commission.

It was a great experience, and I consider the PO a friend, as we continue communication going on four years now. He still gives me good tips on our boat. He got out of boating and into fast classic cars.

It is worth asking to meet the owner. I always will, and any broker of my boat will know that I am willing to meet serious buyers so long as I am able. Then a reasonable offer is better able to be made and accepted.

I realize that some owners or brokers will never do that, (then I will move on) or may be unable, (then I will communicate through the broker).

I want to buy from a proud seller, and I want to be one.

I have been buying and selling for almost 40 years. I detest the necessity to make a full price offer contingent on survey and then ask for price concessions after the survey; it's always seemed somehow dishonest to me. But that is what most now expect and if you don't do it, the broker might not even present the offer to the buyer in writing, he'll just call him to see if there is any interest at that price, or he won't call at all. The broker should present every offer in writing unless you don't want him to. that should be your call, not his. An offer in writing is far more valuable than an oral offer, which holds zero weight in court. The owner can't tell from a phone call whether you are serious.

So what I do depends on the interest in the boat. If it's been for sale for a year or more, the owner is probably getting a bit frustrated and may be amenable to an offer below full price. But if it's new on the market, you can't tell that. Ask the broker how many showings it's had. if you want it, offer full price contingent on survey and mechanical inspection and financing if necessary, but realize that an offer without a financing contingency is more attractive to the seller, and a cash offer with no contingencies is best of all. on occasion, you can get a remarkably good deal with an all cash, no contingency offer. But you have to take the risk of no survey and I wouldn't do that ever without a ton of experience in telling the good from the bad and most won't have that.

Every now and then you find a good boat that hasn't sold for a long time. On that one you can offer whatever you think is a fair offer and see if you get a counter offer or an acceptance. But if it has lots of interest and you want it, you have to do what you have to do.

I agree KS. I much prefer dealing with the owner.

Every boat I've ever bought has been direct from the owner. No brokers involved. Its fairly simple that way. You look at the boat, discuss any issues, negotiate a price pending survey, shake hands, finalize the price after survey, and shake hands again. Deal done.

IMO a boat is only worth what one is willing to pay for it, which is rarely what an owner thinks.
Way too many folks let emotions into this business deal. Until you own it, a boat is nothing more or less than an object for sale. Don't second guess yourself or a sale you missed. Lots and lots of good boats for sale out there.

I really wanted a boat which was sold out from under my offer. It turns out there was a hole in one of the fuel tanks, which the surveyor missed and being steel the tank was integral to the hull. Not only did the interior have to be disassembled for safety while the welding was going on, but the actual welding job was much larger than originally thought. I would never have been able to afford those repairs had my offer been accepted.

I wish it wasn't true, but negotiation is often like war. Salespeople range from the friendliest, most helpful and knowledgeable people, to someone who could convince you that you want a purple dinosaur at twice the cost. I've seen it all. Buyers range from people who could be lifelong friends, to crazy judgmental nuts who would only sell to someone with a certain haircut. I find buying to be hell, and a fun challenge in small quantities.

The reality is, unless you drive the broker and/or the seller, they will drive you. If they are driving, you go where they go with little input from you and their whims and pleasures fulfilled. If you are driving, you might get to where you want to if they don't jump out of the car or grab the wheel on you... In either case, it's tricky and rarely fully under your control.

For less philosophical, and more direct advice:

1. Verbal offers are fine, if it seems like they are getting responded to. If not, it's a red flag, quickly put it in writing to be treated seriously. You don't know what's going on with the other side. Often what you think should happen is most surely not happening.
2. Almost everyone is about the money, everyone has a family to feed or at least themselves. It's rare to find someone making decisions outside of money, but it does happen. Hard to tell the difference most times.
3. It may be unethical, but some people will use the strategy of offering whatever it takes to secure the contract, and then negotiate with a survey (houses and boats). This may have been done to you. The other person may have acted like they wouldn't ask for much, and then did. Food for thought: As a competing buyer, if you knew someone was doing this to you, would you do it back to them?

I find the only way to keep your ethics and compete with people without ethics, is to sell your good qualities as a buyer to the broker AND the owner. If people are listening, they will see your value as a buyer.

In the end, people only do things they believe in or are forced to do.

OkSkipper said:

...

Under CHAPTER 326, FLORIDA STATUTES YACHT AND SHIP BROKERS’ ACT, 326.006 Powers and duties of division, paragraph e., 4. a brokers license may be revoked if he/she "Acts for both the buyer and seller in a transaction involving a yacht without the knowledge and written consent of both parties."

It would appear, if disclosed, the broker can represent both part.....

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That something ceases to be license revoking conduct doesn`t mean a broker should do it. It`s still a conflict of interest even though disclosed, and it`s very likely one party`s interests(likely the seller) will be preferred to the other. If the disclosure includes a statement to that effect, it`s caveat emptor for the buyer(unless the buyers interests are being preferred).

OkSkipper said:

I have long ago stopped trying to figure out what "actually" goes on in the head of a buyer or seller. I have seen sellers accept the lower of 2 offers because the seller thought their "baby" would be in better hands.

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Isn't that the truth. Houses are the same way. I know a case where a lady seller was an artist and she'd painted all the outside trim on the house pink. One potential buyer mentioned repainting it. She would not talk to him nor entertain any offer from him unless he'd agree in the contract to keep the color. The real estate agent warned all future buyers. It finally sold and a day later the painters were there and the lady showed up and screamed and cursed.

Sellers may, legitimately,choose a buyer making a lower offer than another. If there are 2 acceptable $ offers,a seller may make a judgement which buyer seems better. Reliability,financial means, integrity, lots of aspects come into it. But preserving exterior house color is a long shot.

mod45 said:

The broker I spoke with would represent both myself and the seller.

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I am not a boat broker, but I was an insurance broker and I think that the same general rule applies: As a broker in a transaction you can only represent one party. It is simply not possible to represent both the buyer and the seller, since their objectives are rarely if ever identical.

You can honestly represent a buyer or a seller, but not both.

mod45 said:

@twistedtree I agree with you, but as a buyer absolutely hate to be in the position of negotiating having sunk thousands of dollars into a haulout/trial/survey. Similarly as a seller, I'd rather give someone a good price and assuming nothing major is wrong they can redirect that savings however they see fit.

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Great idea. But it didn't work!

You are putting a lot of effort in this thread to figure out what went wrong.

A number of people have already told you.
You rationalizing why you like your system better, won't change anything.

Or, as others have pointed out already,
Seller had buyer in hand, because buyer gave offer and paid for survey.
You on the other hand, made an offer with no commitment.

"A bird in the hand is worth more than a potential 3% gain in the bush"

Yes, you may quote me.
Good luck next time.

Without a writing, there is no chance of getting the boat.

I am not sure why this has generated so much discussion. First we don't know whether the previous buyer's offer had been accepted. Regardless, mod45 could have submitted a written offer with the usual contingencies, which the broker would have been obligated to present to the seller. The seller then would then have to decide wether to accept mod45's offer or not. If the Seller declines the offer, or let's it lapse, than all is over as far as mod45 is concerned. Or Seller could make a contingent acceptance of mod45's offer, which would become primary should the first agreement fall out.

By submitting a written offer, mod45 at least has a chance to purchase the boat he wanted. Without a writing nothing gets communicated to the seller, and he out of luck before even starting.

In our first home sale we chose a lower offer in a multiple offer situation primarily because we felt the buyer was the most committed with the most to gain by completing the transaction. The higher offer had listed so many specific contingencies (beyond financing and inspection) we felt it was less likely to land on the offer. We felt the buyer who made the higher offer did it only to remove competitors, but would leveraging the inspection and contingencies to lower the offer through the process. To this day I still think we were right.

In the end we probably left 3% on the table (starting with a 10% over list offer) but the house was sold and landed at the original offer. The buyer was happy and we were happy. At the closing the owner gave us a gift; a drawing of Portland Harbor (Maine) which I sailed on weekly and we still have it hanging in our current home 24 years later.

Yep, right call and worth it.

For boat purchases the risk is almost entirely on the buyer. Given the seller has no obligation to disclose deficiencies if the buyer or surveyor miss something it can be incredibly expensive to remediate and all on the buyer. Fuel tanks, engines, generators, rotted decks, water in the hull coring, etc...far more financial risk than a $13,000 roof or $8,000 furnace.

For a few boats we've considered I've had brokers tell me to make an offer 10% - 15% below asking and let the survey do the rest of the work. Not a bad strategy and one that worked for our current boat. Ultimately we all want to buy something that has an agreed value and a known issues list.

So as a buyer I'm all about making an offer to get into the survey. Both the buyer and seller will have a sobering experience but in the end the issues should be known, the value established and a final purchase price agreed - perhaps begrudgingly.

The current boat buying process, for all of it's faults and antiquated steps, basically works.

Airstream345 said:

In our first home sale we chose a lower offer in a multiple offer situation primarily because we felt the buyer was the most committed with the most to gain by completing the transaction. The higher offer had listed so many specific contingencies (beyond financing and inspection) we felt it was less likely to land on the offer. We felt the buyer who made the higher offer did it only to remove competitors, but would levering the inspection and contingencies to lower the offer through the process. To this day I still think we were right....

For boat purchases the risk is almost entirely on the buyer. Given the seller has no obligation to disclose deficiencies if the buyer or surveyor miss something it can be incredibly expensive to remediate...

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Agreed except, as I see it, the agreement is little more than an option or voidable agreement in the buyers favour. A buyer dissatisfied with the due diligence process can withdraw. Meanwhile the seller is out of the market, maybe even committed elsewhere in expectation, who knows.

True, a written offer still has large windows and doors for the buyer to jump out of for almost any reason.

Admittedly, I didn't read through all of the posts. What I do see here is the seller had a single offer at a higher price. They moved forward with survey and seatrial and the buyer listed the things he wants fixed. The seller had an option to reduce price or repair. The seller clearly assumed repairing prior to sale and maintaining the offer price was his best option.

What the seller didn't have was an alternative offer in writing for a lower sell price and no request for replacement. What the seller could have done is compared his bottom line between both offers, provided he had a second offer.

The broker gets paid on the percentage of the sell price, not the cost of the repairs. The broker is not compelled to divulge verbal conversations, because that is not an official offer. The broker is required to divulge all offers in writing.

Lesson: Make an offer and let the seller (not the broker) decide whether the offer is good or not.

IMO you didn't submit an offer nor did you communicate to the owner why your offer was low.

The other buyer let the survey do the negotiating for him. An independent survey of faults will usually be better respected by the seller than a buyers opinion.

nobles9596 said:

JUST MY OPINION:

I would say it would be foolish to believe a broker ever truly represents the seller and the buyer. The broker wants to get the largest amount of commission for himself and the largest amount of money for the seller. Who does he truly want to be loyal too?

I would also demand that all offers be taken directly to the seller. Sometimes it does not hurt to find out who the owner is and speak directly to them. This is not hard with a little investigation through your state of the coast guard database.

I would also say, unless you are 100% effecient in repairing and working on all systems on the boat to ALWAYS get a survey. Most insurance companies will want one, depending on the size and age of the boat.

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Totally agree. The "dual agency" thing just doesn't cut it. The broker is working for the party that pays him, period, and most often the seller.

As for this deal, a few thoughts:

Absolutely make an offer in writing, no down side. Any honest broker will present it, regardless of the details.

If one is not experience in negotiating or boat buying (or buying similar, like houses, building, businesses, airplanes), then hire a buyers broker and pay the guy. In the offer the broker can reduce the commission from the sellers price and not participated in the commission, and you'd get the boat for the same price as you would have not having a buyers broker. Done all the time. The buyers broker can council, advise, help with offers, survey, etc, often better than the buyer can.

If you REALLY want the boat, and aren't worries about a few contingencies, make an offer with a deposit equal to you offer and include in the offer that you can close in ONE day. That's almost a surefire way to get the boat. This works well on something that's one of a kind, very hard to find, something where ownership is much more important than the price OR it's just a killer deal.

I've done this many times, especially with houses, and have had the seller reject higher offers, especially buying foreclosures from banks. I've done similar with a few boats over the years.... gone to look at the boat with cash, made the deal and came home with it on the same trip..... BUT the deal was good enough.

Another key in making offers. Get to know the seller is extremely valuable, and find out why he is selling, which they often done disclose. Could be, he already bought boat no 2 and has killer payments and marine costs that he wants stopped, or he feels like he needs to be present to sell and his family (wife, GF, grandkids.... whatever) have moved and just waiting for him. Often getting to know him you can actually end up being friends and he'll work well with you because now your his friend. (yes, that works).

Personal thoughts:
I never put a down payment in with an offer (maybe), but I will write a check to MY representative as trustee to hold the down and disburse when needed.
I MUCH prefer to work directly with the seller, and rarely am I denied that opportunity. Getting to know him is paramount. I'll have him pick me up at the airport, take him to lunch/dinner, whatever. I may make several trips, if reasonably close..... especially, if local.

IF I use a broker, FOR SURE, I want one that I personally know, no surprises.

At times it pays to work fast.... especially if its a killer deal and there's competition out there. And sometimes it pays to work slow, slow market, no competition, seller has no other options. I've had deals take as little as a few hours and had one last over 2 years.

And sellers often change their mind, the "firm" disappears, prices drop dramatically, or they could just raise the price where it will never sell. (wife said sell, and hubby doesn't want to). An excellent opportunity comes when a seller can't sell the boat themselves, so they list it, and the broker can't sell it, so the seller tries again ..... setting up a really motivated seller for a good deal.

Wifey B: Summing this all up in one sentence, the OP is complaining because he didn't get a boat he never made an offer to purchase.

Wow this thread got going again! I considered it resolved.

As stated on page 1, it's clear from the feedback my mistake was not insisting the offer be submitted in writing. The buyer never got a chance to consider it and I allowed the broker to filter it out - valuable lesson learned.

Some of the recent critical responses are overlooking that the seller's broker told me it wasn't a strong enough offer to submit despite my rationale for a lower price. Given a mulligan I'd submit a written offer, but I wouldn't change my number. All of the issues on my list will be paid for at some point and I'd rather the seller acknowledge that before paying for a multi-day trial/survey. If your style is to negotiate post survey more power to you, but it's a weaker position especially if there are multiple buyers interested.

There is an update since my last post, the deal closed and I spoke with the broker afterwards. He admitted to "underestimating" how much his seller would give on survey. When pressed, he listed the items they repaired but not everything the guy whose company did the work told me about at the marina. He acted like it was standard procedure and didn't mention our discussion from a month ago. And then... he tried to show me another boat! /rimshot

BandB said:

Wifey B: Summing this all up in one sentence, the OP is complaining because he didn't get a boat he never made an offer to purchase.

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What’s the [internet forum of strong opinions] fun in that?!

BandB said:

Wifey B: Summing this all up in one sentence, the OP is complaining because he didn't get a boat he never made an offer to purchase.

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He did make an offer. The broker, who he thought was his broker as well as the seller`s broker, summarily rejected it without referring it to the seller, using his agency for the seller to do so.
People can talk all they like about offers written or unwritten but it was an offer, and it would likely have been reduced to writing had it not been summarily rejected.

BruceK said:

He did make an offer. The broker, who he thought was his broker as well as the seller`s broker, summarily rejected it without referring it to the seller, using his agency for the seller to do so.
People can talk all they like about offers written or unwritten but it was an offer, and it would likely have been reduced to writing had it not been summarily rejected.

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Sorry, but not in writing and not including consideration, it's not an offer. Consideration is the key thing missing legally. In writing, it missing from good practices. I realize, in his mind, he was making an offer or attempting to, but not to the broker, and definitely not to the seller who never saw it.

He understands now and will do different next time. Perhaps it should be simpler and more done orally, but that's not how it is. I know people who do all their business verbally. They sure do spend a lot of time in court.

BandB said:

Sorry, but not in writing and not including consideration, it's not an offer. Consideration is the key thing missing legally. In writing, it missing from good practices. I realize, in his mind, he was making an offer or attempting to, but not to the broker, and definitely not to the seller who never saw it.

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What do you mean I wasn't making an offer to the broker?